Buying gas??

Hayden · Post by **Hayden** » 25 Jan 2007 20:46

Here is my Idea. Can I buy a large quanity of gas at present price? We have seen gas here as much as $3.00 a gal. Im sure it will hit that again some day but right now its $1.88. Can I purchase......say a 1000 gals at $1.88. Have that on a card or something and then use that card anytime I want. Sooooooo when gas goes back up to $3.00 or something like that??? I can use my card and get my gas at the pre purchased price. I have been thinking about this and it makes total since to me. Just think if one had done this 20 years ago? or 10 years ago? Wouldnt it have been worth it????

So has anyone ever heard of something like this???

Hayden

safiri · Post by **safiri** » 25 Jan 2007 21:54

Yeah, it's called a hedge. Futures trading. You are going to have to "buy" a whole lot more than that though. And you don't actually get to use "your" fuel, rather you can sell the contract for more when prices go up. Or perhaps this is all backwards as I don't do futures trading.

Now, for the real comment ... Tracy, you ride your motorcycle everywhere. How long is it going to take you to use a thousand gallons?

Hank Moody · Post by **Hank Moody** » 26 Jan 2007 07:33

How about getting a large tank to store the fuel in like I have seen on farms. I don't if this is still legal given the environmental issues this could raise.

A better idea is to put the $2,000.00 on the Bears next week and use the profits to buy fuel

ajayhawkfan · Post by **ajayhawkfan** » 26 Jan 2007 09:44

Put it on the Bears to lose if you want to win.

safiri · Post by **safiri** » 26 Jan 2007 17:26

The problem with storage is that gas goes bad. The lighter (shorter) carbon chains evaporate out and leave behind the heavier (longer) carbon chains. This is what forms the varnish on the inside of the carb bowl when you repeatedly leave gas in there for a long period and the ligher elements evaporate off. I am not sure how Stabil works, but it slows / stops this process.

I am not sure what time period gas is good for ... I figure a year if you don't bake it in the sun. Heat exascerbates the evaporation problem. Of course you have to take into account the time value of the money you spent to fill the tank, the cost of the tank, the environmental / safety / security issues involved in the onsite storage, etc.

Post by **troy** » 26 Jan 2007 22:35

Mike is right, it's called options trading. But you need some big bucks to get involved.
http://www.infinitytrading.com/unleaded ... tions.html

They are called options because you are buying the option to buy gas at a set price later. Say gas is at $2.50/g, but you believe that gas will be reaching $2.60/g within 3 months. You can buy 100 $2.55 options for $2.50. If you are right, and gas goes over $2.55/g, you'll be able to "exercise" your options. However, you paid a premium to have the right to buy at $2.55/g---you paid $2.50 per 100 gallons or 2.5 cents per gallon. So it only becomes an advantage for you to exercise your options if gas goes over $2.575/g. When you buy options, they have an expiration date, so if things don't go your way by the expiration date, you are out the premium you paid---and that is pure profit for the other person.

slimtrader · Post by **slimtrader** » 26 Jan 2007 22:38

When gas prices were over $3 I remember seeing a news story about a gas station or co-op that does this. I think they were in Minnesota and there were interviews with customers that had advanced purchased fuel for much less. The risk of this is that you may have to wait a long time for prices to rise enough to make it worth useing your $1000 of pre-purchased fuel. During that time you may have been better off putting it into a different investment. I don't know but I find it hard to believe that they would only charge you for todays fuel prices, they probably do mark it up slightly from what you chould pay down the street in order to make it work for them.

Futures markets have a set date and price and if you purchase futures to buy a barrel of oil at $55 in May you may have to pay $3 as your premium for that right to purchase. The price on any given day would go up or down depending on the oil prices and other market variables but you would have to have oil above $58 before you would see any profit ($55+$3) and if your option to buy expires in May with oil below $55 you lose your $3 investment, if it is at $56 you only lost $2 and so on. On top of the premium you will also have to pay broker fees that will make your break even point higher yet.

Good luck!

Post by **troy** » 26 Jan 2007 22:40

Ha! Me & Slim saying the same thing at the same time!

slimtrader · Post by **slimtrader** » 26 Jan 2007 22:48

Ha, Me and Troy saying about the same thing at about the same time.

Troy, you know we wouldn't be able to talk bout "carbon chains" and "evaporation" and make it sound intelligible!